CHAPTER V

PLACEMENT UNDER CONSERVATORSHIP

Section 67. Conservatorship. - The grounds and procedures for placing a bank under
conservatorship, as well as, the powers and duties of the conservator appointed for
the bank shall be governed by the provisions of Section 29 and the last two
paragraphs of Section 30 of the New Central Bank Act: Provided, That this Section
shall also apply to conservatorship proceedings of quasi-banks. (n)

CHAPTER VI

CESSATION OF BANKING BUSINESS

Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any bank

organized under the laws of the Philippines, or of any branch or office in the
Philippines of a foreign bank, written notice of such liquidation shall be sent to
the Monetary Board before such liquidation shall be sent to the Monetary Board
before such liquidation is undertaken, and the Monetary Board shall have the right
to intervene and take such steps as may be necessary to protect the interests of
creditors. (86)

Section 69. Receivership and Involuntary Liquidation. - The grounds and procedures
for placing a bank under receivership or liquidation, as well as the powers and
duties of the receiver or liquidator appointed for the bank shall be governed by
the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act:
Provided, That the petitioner or plaintiff files with the clerk or judge of the
court in which the action is pending a bond, executed in favor of the Bangko
Sentral, in an amount to be fixed by the court. This Section shall also apply to
the extent possible to the receivership and liquidation proceedings of quasi-banks.
(n)

Section 70. Penalty for Transactions After a Bank Becomes Insolvent. - Any director
or officer of any bank declared insolvent or placed under receivership by the
Monetary Board who refuses to turn over the bank's records and assets to the
designated receivers, or who tampers with banks records, or who appropriates for
himself for another party or destroys or causes the misappropriation and
destruction of the bank's assets, or who receives or permits or causes to be
received in said bank any deposit, collection of loans and/or receivables, or who
pays out or permits or causes to be transferred any securities or property of said
bank shall be subject to the penal provisions of the New Central Bank Act. (85a)

CHAPTER VII

LAWS GOVERNING OTHER TYPES OF BANKS

Section 71. Other Banking Laws. - The organization, the ownership and capital
requirements, powers, supervision and general conduct of business of thrift banks,
rural banks and cooperative banks shall be governed by the provisions of the Thrift
Banks Act, the Rural Banks Act, and the Cooperative Code, respectively. The
organization, ownership and capital requirements, powers, supervision and general
conduct of business of Islamic banks shall be governed by special laws. The
provisions of this Act, however, insofar as they are not in conflict with the
provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code
shall likewise apply to thrift banks, rural banks, and cooperative banks,
respectively. However, for purposes of prescribing the minimum ratio which the net
worth of a thrift bank must bear to its total risk assets, the provisions of
Section 33 of this Act shall govern. (n)
CHAPTER VIII

FOREIGN BANKS

Section 72. Transacting Business in the Philippines. - The entry of foreign banks
in the Philippines through the establishment of branches shall be governed by the
provisions of the Foreign Banks Liberalization Act. The conduct of offshore banking
business in the Philippines shall be governed by the provisions of the Presidential
Decree No. 1034, otherwise known as the "Offshore Banking System Decree." (14a)

Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7)
years from the effectivity of this act and subject to guidelines issued pursuant to
the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign
bank to acquire up to one hundred percent (100%) of the voting stock of only one
(1) bank organized under the laws of the Republic of the Philippines. Within the
same period, the Monetary Board may authorize any foreign bank, which prior to the
effectivity of this Act availed itself of the privilege to acquire up to sixty
percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization
Act and the Thrift Banks Act, to further acquire voting shares such bank to the
extent necessary for it to own one hundred percent (100%) of the voting stock
thereof. In the exercise of the authority, the Monetary Board shall adopt measures
as may be necessary to ensure that at all times the control of seventy percent
(70%) of the resources or assets of the entire banking system is held by banks
which are at least majority-owned by Filipinos. Any right, privilege or incentive
granted to a foreign bank under this Section shall be equally enjoyed by and
extended under the same conditions to banks organized under the laws of the
Republic of the Philippines. (Secs. 2 and 3, RA 7721

Section 74. Local Branches of Foreign Banks. - In the case of a foreign bank which
has more than one (1) branch in the Philippines, all such branches shall be treated
as one (1) unit for the purpose of this Act, and all references to the Philippine
branches of foreign banks shall be held to refer to such units. (68)

Section 75. Head Office Guarantee. - In order to provide effective protection of

the interests of the depositors and other creditors of Philippine branches of a
foreign bank, the head office of such branches shall fully guarantee the prompt
payment of all liabilities of its Philippine branch. (69) Residents and citizens of
the Philippines who are creditors of a branch in the Philippines of a foreign bank
shall have preferential rights to the assets of such branch in accordance with the
existing laws. (19)

Section 76. Summons and Legal Process. - Summons and legal process served upon the
Philippine agent or head of any foreign bank designated to accept service thereof
shall give jurisdiction to the courts over such bank, and service of notices on
such agent or head shall be as binding upon the bank which he represents as if made
upon the bank itself. Should the authority of such agent or head to accept service
of summons and legal processes for the bank or notice to it be revoked, or should
such agent or head become mentally incompetent or otherwise unable to accept
service while exercising such authority, it shall be the duty of the bank to name
and designate promptly another agent or head upon whom service of summons and
processes in legal proceedings against the bank and of notices affecting the bank
may be made, and to file with the Securities and Exchange Commission a duly
authenticated nomination of such agent. In the absence of the agent or head or
should there be no person authorized by the bank upon whom service of summons,
processes and all legal notices may be made, service of summons, processes and
legal notices may be made upon the Bangko Sentral Deputy Governor In-Charge of the
supervising and examining departments and such service shall be as effective as if
made upon the bank or its duly authorized agent or head. In case of service for the
bank upon the Bangko Sentral Deputy Governor In-charge of the supervising and
examining departments, the said deputy Governor shill register and transmit by mail
to the president or the secretary of the bank at its head or principal office a
copy, duly certified by him, of the summons, process, or notice. The sending of
such copy of the summons, process, or notice shall be a necessary part of the
services and shall complete the service. The registry receipt of mailing shall be
prima facie evidence of the transmission of the summons, process or notice. All
costs necessarily incurred by the said Deputy Governor for the making and mailing
and sending of a copy of the summons, process, or notice to the president or the
secretary of the bank at its head or principal office shall be paid in advance by
the party at whose instance the service is made. (17)

Section 77. Laws Applicable. - In all matters not specifically covered by special
provisions applicable only to a foreign bank or its branches and other offices in
the Philippines any foreign bank licensed to do business in the Philippines shall
be bound by the provisions of this Act, all other laws, rules and regulations
applicable to banks organized under the laws of the Philippines of the same class,
except those that provide for the creation, formation, organization or dissolution
of corporations or for the fixing of the relations, liabilities, responsibilities,
or duties of stockholders, members, directors or officers of corporations to each
other or to the corporation. (18)

Section 78. Revocation of License of a Foreign Bank - The Monetary Board may revoke
the license to transact business in the Philippines of, any foreign bank, if it
finds that the foreign bank is insolvent or in imminent danger thereof or that its
continuance in business will involve probable loss to those transacting business
with it. After the revocation of its license, it shall be unlawful for any such
foreign banks to transact business in the Philippines unless its license is renewed
or reissued. After the revocation of such license, the Bangko Sentral shall take
the necessary action to protect the creditors of such foreign bank and the public.
The provisions of the New Central Bank Act on sanctions and penalties shall
likewise be applicable. (16)

CHAPTER IX

TRUST OPERATIONS

Section 79. Authority to Engage in Trust Business. - Only a stock corporation or a

person duly authorized by the Monetary Board to engage in trust business shall act
as a trustee or administer any trust or hold property in trust or on deposit for
the use, benefit, or behoof of others. For purposes of this Act, such a corporation
shall be referred to as a trust entity. (56a; 57a)

Section 80. Conduct of Trust Business. - A trust entity shall administer the funds
or property under its custody with the diligence that a prudent man would exercise
in the conduct of an enterprise of a like character and with similar aims. No trust
entity shall, for the account of the trustor or the beneficiary of the trust,
purchase or acquire property from, or sell, transfer, assign, or lend money or
property to, or purchase debt instruments of, any of the departments, directors,
officers, stockholders, or employees of the trust entity, relatives within the
first degree of consanguinity or affinity, or the related interests, of such
directors, officers and stockholders, unless the transaction is specifically
authorized by the trustor and the relationship of the trustee and the other party
involved in the transaction is fully disclosed to the trustor of beneficiary of the
trust prior to the transaction. The Monetary Board shall promulgate such rules and
regulations as may be necessary to prevent circumvention of this prohibition or the
evasion of the responsibility herein imposed on a trust entity. (56)

Section 81. Registration of Articles of Incorporation and By-Laws of a Trust

Entity. - The Securities and Exchange Commission shall not register the articles of
incorporation and by-laws or any amendment thereto, of any trust entity, unless
accompanied by a certificate of authority issued by the Bangko Sentral. (n)

Section 82. Minimum Capitalization. - A trust entity, before it can engage in trust
or other fiduciary business, shall comply with the minimum paid-in capital
requirement which will be determined by the Monetary Board. (n)

Section 83. Powers of a Trust Entity. - A trust entity, in addition to the general
powers incident to corporations, shall have the power to:

83.1 Act as trustee on any mortgage or bond issued by any municipality,

corporation, or any body politic and to accept and execute any trust consistent
with law;

83.2 Act under the order or appointment of any court as guardian, receiver,
trustee, or depositary of the estate of any minor or other incompetent person, and
as receiver and depositary of any moneys paid into court by parties to any legal
proceedings and of property of any kind which may be brought under the jurisdiction
of the court;

83.3. Act as the executor of any will when it is named the executor thereof;

83.4 Act as administrator of the estate of any deceased person, with the will
annexed, or as administrator of the estate of any deceased person when there is no
will;

83.5. Accept and execute any trust for the holding, management, and administration
of any estate, real or personal, and the rents, issues and profits thereof; and

83.6. Establish and manage common trust funds, subject to such rules and
regulations as may be prescribed by the Monetary Board.

Section 84. Deposit for the Faithful Performance of Trust Duties. - Before
transacting trust business, every trust entity shall deposit with the Bangko
Sentral, as security for the faithful performance of its trust duties, cash or
securities approved by the Monetary Board in an amount equal to or not less than
Five hundred thousand pesos (P500,000.00) or such higher amount as may fixed by the
Monetary Board: Provided, however, That the Monetary Board shall require every
trust entity to increase the amount of its cash or securities on deposit with the
Bangko Sentral in accordance with the provisions of this paragraph. Should the
capital and surplus fall below said amount, the Monetary Board shall have the same
authority as that granted to it under the provisions of the fifth paragraph of
Section 34 of this Act. A trust entity so long as it shall continue to be solvent
and comply with laws or regulations shall have the right to collect the interest
earned on such securities deposited with the Bangko Sentral and, from time to time,
with the approval of the Bangko Sentral, to exchange the securities for others. If
the trust entity fails to comply with any law or regulation, the Bangko Sentral
shall retain such interest on the securities deposited with it for the benefit of
rightful claimants. Al claims rising out of the trust business of a trust entity
shall have priority over all other claims as regards the cash or securities
deposited as above provided. The Monetary Board may not permit the cash or
securities deposited in accordance with the provisions of this Section to be
reduced below the prescribed minimum amount until the depositing entity shall
discontinue its trust business and shall satisfy the Monetary Board that it has
complied with all its obligations in connection with such business. (65a)

Section 85. Bond of Certain Persons for the Faithful Performance of Duties. -
Before an executor, administrator, guardian, trustee, receiver or depositary
appointed by the court enters upon the execution of his duties, he shall, upon
order of the court, file a bond in such sum as the court may direct. Upon the
application of any executor, administrator, guardian, trustee, receiver, depositary
or any other person in interest, the court may, after notice and hearing, order
that the subject matter of the trust or any part, thereof be deposited with a trust
entity. Upon presentation of proof to the court that the subject matter of the
trust has been deposited with a trust entity. Upon presentation of proof to the
court that the subject matter of the trust has been deposited with a trust entity,
the court may order that the bond given by such persons for the faithful
performance of their duties be reduced to such sums as it may deem proper:
Provided, however, That the reduced bond shall be sufficient to secure adequately
the proper administration and care of any property remaining under the control of
such persons and the proper accounting for such property. Property deposited with
any trust entity in conformity with this Section shall be held by such entity under
the orders and direction of the court. (59)

Section 86. Exemption of Trust Entity from Bond Requirement. - No bond or other
security shall be required by the court from a trust entry for the faithful
performance of its duties as court-appointed trustee, executor, administrator,
guardian, receiver, or depositary. However, the court may, upon proper application
with it showing special cause therefore, require the trust entity to post a bond or
other security for the protection of funds or property confided to such entity.
(59)

Section 87. Separation of Trust Business from General Business. - The trust
business and all funds, properties or securities received by any trust entity as
executor, administrator, guardian, trustee, receiver, or depositary shall be kept
separate and distinct from the general business including all other funds,
properties, and assets of such trust entity. The accounts of all such funds,
properties, or securities shall likewise be kept separate and distinct from the
accounts of the general business of the trust entity. (61)

Section 88. Investment Limitations of a Trust Entity. - Unless otherwise directed

by the instrument creating the trust, the lending and investment of funds and other
assets acquired by a trust entity as executor, administrator, guardian, trustee,
receiver or depositary of the estate of any minor or other incompetent person shall
be limited to loans or investments as may be prescribed by law, the Monetary Board
or any court of competent jurisdiction. (63a)

Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise specifically
directed by the trustor or the nature of the trust, real estate acquired by a trust
entity in whatever manner and for whatever purposes, shall likewise be governed by
the relevant provisions of Section 52 of this Act. (64a)

Section 90. Investment of Non-Trust Funds. - The investment of funds other than
trust funds of a trust entity which is a bank, financing company or an investment
house shall be governed by the relevant provisions of this Act and other applicable
laws. (64)

Section 91. Sanctions and Penalties. - A trust entity or any of its officers and
directors found to have willfully violated any pertinent provisions of this Act,
shall be subject to the sanctions and penalties provided tinder Section 66 of this
Act as well as Sections 36 and 37 of the New Central Bank Act.

Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust
entity in its capacity as trustee shall be subject to any claims other than those
of the parties interested in the specific trusts. (65)

Section 93. Establishment of Branches of a Trust Entity. - The ordinary business of

a trust entity shall be transacted at the place of business specified in its
articles of incorporation. Such trust entity may, with prior approval of the
Monetary Board, establish branches in the Philippines and the said entity shall be
responsible for all business conducted in such branches to the same extent and in
the same manner as though such business had all been conducted in the head office.
For the purpose of this Act, the trust entity and its branches shall be treated as
one unit. (67)

CHAPTER X

FINAL PROVISIONS

Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations.
- Within a period of three (3) years from the effectivity of this Act, the Bangko
Sentral shall phase out and transfer its supervising and regulatory powers over
building and loan associations to the Home Insurance and Guaranty Corporation which
shall assume the same. Until otherwise provided bylaw1 building and loan
associations shall continue to be governed by Sections 39 to 55, Chapter VI of the
General Banking Act, as amended, including such rules and regulations issued
pursuant thereto. Upon assumption by the Home Insurance and Guaranty Corporation of
supervising and regulatory powers over building and loan associations, a references
in Sections 39 to 55 of the General Banking Act, as amended, to the Bangko Sentral
and the Monetary Board shall be deemed to refer to the Home Insurance and Guaranty
Corporation and its board of directors, respectively. (n)

Section 95. Repealing Clause. - Except as may be provided for in Sections 34 and 94
of this Act, the General Banking Act, as amended, and the provisions of any other
law, special charters, rule or regulation issued pursuant to said General Banking
Act, as amended, or parts thereof, which may be inconsistent with the provisions of
this Act are hereby repealed. The provisions of paragraph 8, Section 8, Republic
Act No. 3591, as amended by republic Act No. 7400, are likewise repealed. (90a)

Section 96. Separability Clause. - If any provision or section of this Act or the
application thereof to any person or circumstance is held invalid, the other
provisions or sections of this Act, and the application of such provision or
section to other persons or circumstances shall not be affected thereby. (n)

Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days
following its publication in the Official Gazette or in two (2) national newspapers
of general circulation. (91)